What's Holding Back European Securtization Issuance?
24/06/2014Policymarkers’ recent
call for a revitalized European securitization market have,
ironically, coincided with the culmination of several regulatory
projects that could significantly reduce investor demand. In
particular, a number of proposed changes to banks’ and insurers’
regulatory capital and liquidity requirements treat securitizations
rather conservatively, in Standard & Poor’s view, relative to their
observed performance and relative to some other credit asset
classes, such as covered bond and whole loan portfolios.
In Standard & Poor’s view, these pending regulatory changes are by far the largest structural threat to the future of the European securitization market, as they could deter banks and insurers from holding such securities, potentially switching off demand from a large portion of investor base. That said, there may still be some scope for changes as the regulatory texts become reflected in law. For example, the European Commission is working to define what it considers to be “high quality” securitization, and could make some of the rules more lenient for these types of transactions.
In Standard & Poor’s view, these pending regulatory changes are by far the largest structural threat to the future of the European securitization market, as they could deter banks and insurers from holding such securities, potentially switching off demand from a large portion of investor base. That said, there may still be some scope for changes as the regulatory texts become reflected in law. For example, the European Commission is working to define what it considers to be “high quality” securitization, and could make some of the rules more lenient for these types of transactions.